Sharing office unicorn WeWork, the road to listing is risky

After Uber, the online car giant, went public, the shared office space company WeWork has become the highest-priced startup in the US for $47 billion.

On August 14, WeWork officially submitted an IPO prospectus to the US Securities and Exchange Commission (SEC). This prospectus shows investors honestly the loss data and potential risks over the years, and also depicts it as a picture of a mature company with multiple businesses.

In 2010, WeWork was founded in New York. Under the heavy asset model, it leased commercial office space in the form of long-term lease, and then space-cut design, upgrade and upgrade to short-term lease to different customers. But its logic is not a simple “two landlords”. Unlike the traditional real estate industry, which only emphasizes area and space, it emphasizes services, with a focus on membership and membership systems, and they charge extra fees through value-added services. CEO Neumann once said in an open letter, “Nine years ago, when we started WeWork in New York, what we wanted to do was not just office, but infiltration into every aspect of people’s lives.”

Today, WeWork has 528 office spaces in 111 cities around the world, with more than 600,000 jobs, and its revenue is still dependent on rent. Neumann’s analogy, WeWork’s current stage, just like Amazon’s initial stage of selling books, the imagination of future business is much more than that. This is also the important reason why Sun Zhengyi, the chairman of Japan Softbank Group, decided to invest in WeWork. Softbank believes that WeWork may be worth hundreds of billions of dollars in the future, and has so far invested more than 10 billion US dollars to help its monopoly expansion. This is also reminiscent of Sun Ming’s famous investment more than a decade ago. He invested 20 million US dollars in Alibaba, then a small e-commerce company, and became its largest shareholder, and then earned a lot of money.

Lack of profitability, overvaluation, a recession in the economic environment, and the suspicious corporate governance of the founders have all caused We Work to be controversial. Some investors believe that it does not have the value of tens of billions of dollars. At this time, the choice of listing, largely because it is difficult to continue to melt money from Softbank, IPO for cash flow. In addition to equity financing, WeWork also signed up to $6 billion in bond financing with JP Morgan Chase, Goldman Sachs, Citigroup, and HSBC.

WeWork co-founder Neumann

With a common soft silver background, Alibaba also led WeWork, and its Ant Financial and Alibaba Cloud have cooperated with them. WeWork itself has continuously invested in and acquired some marketing companies and office software manufacturers. Because members who choose to share space are often start-ups, WeWork can provide them with many services, such as financing bridges, entrepreneurship training, and cloud computing infrastructure. Previously, Sun Zhengyi believed that WeWork was “not crazy enough” to support Neumann’s continued expansion, but Saudi Arabia’s major shareholders of Softbank’s fund had concerns about WeWork’s valuation and environment, so its last round of financing shrank.

WeWork’s model is very testable for operational capabilities. In addition to the long-term fixed costs of leased properties, the vacancy rate, depreciation rate and marketing promotion costs of the property need to be considered, and the liquidity risk is very high. For IPO, WeWork is still difficult to hide the problems in the prospectus by retouching and packaging the data. It emphasizes that it has reached a revenue of 1 billion US dollars in 7 years, and then reached 2 billion in one year. In the recent 6 months, it has reached 3 billion. However, the company’s loss scale has also expanded simultaneously. 1.9 billion US dollars, this is also the focus of the market. WeWork’s explanation is that this is a necessary sacrifice to ensure economies of scale.

In addition, usually the company’s founders will cash out their stocks after listing, but just a month ago, CEO Adam Neumann cashed in more than $700 million from the company. Moreover, he also rented his four properties to the company, suspected of conflict of interest. In response, he said that this is to prove to some landlords that WeWork’s model is feasible and dispel their concerns.

The Israeli-born CEO, who was transferred to 13 families during his childhood divorce, went to the Baruch College in the United States and then dropped out of school. He founded a company that produced foldable high-heeled shoes and knee-padded baby clothing. In 2008, Neumann met an architect with similar growth experience. The latter designed an American clothing store at the construction company and advised Neumann to move the company to the New York art district. In order to save money, Neumann sublease part of the office space to another company, in the process of creating a shared office entrepreneurial idea. Neumann is very good at convincing investors and frequently showing WeWork’s vision of changing the world. But in the past few years, WeWork’s chaotic corporate management has also been questioned, such as excessive party culture and high staff mobility.

Similarly, there is a fund investment by Softbank, which also burns money to expand its business. Uber has landed in New York, and the stock price is still below the issue price. Recently, it has ushered in the biggest loss in the quarter. The US stock market will only be more cautious about WeWork’s listing plan. In addition to speculators who like gambling, real value investors are always a minority in history and market. What they need is a long-term belief in the prospect of shared office culture. The only question is whether WeWork has the ability to support a super The myth of the growth of the unicorn.